Toronto begins drafting Airbnb regulations as listings soar

Jeff Gray, The Globe and Mail

Toronto begins drafting new Airbnb regulations

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With concern mounting over an explosive increase in short-term rentals listed on websites such as Airbnb, the City of Toronto is set to start drafting proposed regulations that could keep the burgeoning “sharing economy” industry in check.

In a report to go before the executive committee next week, city bureaucrats say Airbnb rentals in Toronto doubled from 2014 to 2015, with 9,460 rooms or entire units rented via the site that year at least once – as well as hundreds more listed on other sites such as HomeAway, VRBO, FlipKey, Roomorama, Craigslist and Kijiji. On Airbnb as of Oct. 4, the company said it had 7,630 listings in Toronto, offered by 5,720 different hosts.

Citing the potential effect on the conventional hotel business and the already-tight long-term rental market, as well as concerns about the phenomenon’s impact on certain neighbourhoods, city staff say they plan to launch public consultations and issue a report next year on “potential options for regulation.” Any new rules would have to be approved by city council.

In a statement, Airbnb said it welcomed the city’s move. “We look forward to participating in the process,” the company said. “… We are encouraged by the city’s approach and hope it will result in fair, easy-to-follow rules that support home sharing.”

The hotel industry isn’t so sanguine. It accuses the city of dragging its feet on cracking down on what it calls an unfair competitor that gets out of paying sales taxes and other costs.

Terry Mundell, head of the Greater Toronto Hotel Association, said another year was too long to wait for new rules for Airbnb, particularly as Toronto also mulls charging a special hotel tax to help balance its books.

“It looks like we are going to be a year down the road before we start to see any change,” Mr. Mundell said. “And that’s problematic for us.” It’s the latest headache for the city related to the so-called sharing economy, following on the heels of this year’s divisive debate over new regulations that lowered the standards for the taxi business and allowed car-for-hire services offered by Uber to operate legally. And it comes as the city’s municipal licensing and standards department also deals with a continuing crackdown on the explosion of pot dispensaries across the city.

Other cities have also been wrestling with how to deal with Airbnb, which operates in more than 190 countries. In some cities across North America, short-term rentals are allowed but licences are required and only primary residences can be used. In some places, the number of nights a year a unit can be rented is capped; in Seattle, it is 90 nights.

In Vancouver, where the city is pursuing one Airbnb operator in court for violating a bylaw that currently bans short-term rentals, policy-makers are also developing new rules that would allow homeowners to rent out their own principal residences for short periods, but prohibit them from renting their basement suites or laneway houses. The rules are also expected to block people from running year-round commercial operations.

Airbnb portrays itself as primarily a way for seniors or other cash-strapped people looking to make a little money on the side by renting out a spare room in their house. But according to the Toronto staff report, based on numbers provided by Airbnb, there is at least a sizable minority of hosts who appear to be renting out multiple units for much of the year.

For example, 37 per cent of hosts in Toronto using the site had more than one listing in 2015, which translates to about 2,250 hosts operating on that scale. Nine per cent, or about 590, had five or more listings. And while about 72 per cent of all units on Airbnb in Toronto were rented for fewer than 90 days, about 26 per cent were rented out for longer than that. And 9 per cent, or about 600 units, were rented out for more than 181 days.

The report cites concerns from critics that Airbnb is removing units from the rental market, making it tougher for Torontonians unable to afford skyrocketing real estate prices to find places to live. Toronto already has a low 1.6-per-cent vacancy rate, and a study released last month by the Canadian Centre for Policy Alternatives (CCPA) found a high concentration of Airbnb operators in hot downtown neighbourhoods, such as along the waterfront and in Liberty Village.

The CCPA report says the rapid growth of Airbnb raises the spectre that neighbourhoods are being invaded by “ghost hotels,” or units exclusively rented out online for short periods by absentee owners. That study also found that almost two-thirds of Toronto listings were for entire houses, condos or apartments, not a spare room in someone’s home.

City staff’s report before the executive committee next week suggests that some Toronto hosts using Airbnb or other similar sites, depending on where in the city they are, may also be violating the city’s patchwork of zoning rules that long predate any thought of an online-based rental service.

Homes where the owner is present might be classified as bed and breakfasts, which are allowed in residential areas of the old city of Toronto. But if the unit is not the owner’s primary residence, then the operation might be deemed a hotel, and bylaws are more restrictive about where this kind of business can operate. There are still more rules that may apply to condominiums, too, the report reads, as some condo boards in Toronto have themselves banned short-term rentals.

City staff also warn that short-term rental operators could have to pay a new hotel tax, if the city asks the province to allow it to charge a special levy on hotel rooms – an idea floated in recent months by the mayor’s office as the city looks for new sources of cash to balance its books and fund infrastructure spending.

However, Airbnb has said it would pay any such tax it is required to pay, and already pays similar fees in other cities.

The hotel industry’s complaint about Airbnb is that it creates an unfair playing field, as Airbnb operators do not need to pay commercial taxes, follow health and safety rules or shoulder other costs that a hotel operator does.

But Airbnb insists that most of its listings do not actually compete with traditional hotel rooms, as they offer a completely different experience.

The company points to a study from U.S.-based industry consultants STR Inc., of seven U.S. hotel markets – Boston, Los Angeles, Miami, New Orleans, San Francisco, Seattle and Washington – that suggests already more expensive hotel rates are rising in five of those cities, despite the influx of Airbnb.